Download how we are paid for our services

HOW WE ARE PAID FOR OUR SERVICES
We live in an age where consumers have become keenly aware and increasingly sophisticated in their
knowledge of financial service provider fees. We strongly endorse disclosure to our customers of
fees and commissions paid to agents and brokers in the sales and service of insurance products.
As Independent Insurance Agents, we represent and are licensed with a number of major, reputable
insurance companies. Multiple insurer relationships enable us to provide a wide selection of
competitive policies and customized protection to fulfill our customers’ diverse needs.
Premium Commissions
Each insurance company pays commission to their licensed independent agents for the sale of their
insurance policies. These payments are made to cover our fixed costs and the costs of selling and
servicing our customers’ policies throughout the year. The commission amounts vary by policy type
and, in some instances, by company. Following are the average commission percentages paid each
year on the most common policies.
Homeowners
Automobile
Umbrella Liability
Business Owners Policies
Business Automobile
Workers’ Compensation
Group Medical Insurance
Other Group Health Insurance
20% of annual premium
10% of annual premium
15% of annual premium
15% of annual premium
10% of annual premium
5% of annual premium
3% of annual premium
12% of annual premium
Taxes, Filing Fees, and Assessments
No commissions or payments are made to agents for state taxes, filing fees, or assessments.
Examples of such fees include the Massachusetts Division of Industrial Accident Assessment on
workers’ compensation policies and taxes and filing fees charged by some specialty lines insurers on
“high risk” property and liability policies.
Inspection Fees
No commissions or payments are made to agents for inspection fees. Inspection fees are charged to
cover an insurance company’s costs in conducting on-site inspections of properties and insurance
risks. Although an agent may bill and collect inspection fees, these payments are transferred and
paid in full to the insurance companies who require inspections.
Contingency Bonus Fees
Some insurance companies reward their agents by paying bonuses for providing them with clients
who, on average, do not experience excessive losses throughout the year. When insurers do not
experience their expected amount of property damage and liability losses during any year, their profit
margins are also higher than projected. Paying profit-based bonuses to agents and brokers is a
means of sharing company profits and rewarding agents and brokers whose clients are above
average in experiencing losses.
The profitability of insurers is also important to consumers. Profitable insurance companies stabilize
the insurance marketplace, ensuring availability of coverage. In a stable insurance market
consumers are afforded the most competitive pricing and the greatest selection of products.
Contingency bonus fees, by definition, are not guaranteed. They are paid on an annual basis only if
the loss expenses of all of an agent’s clients with an insurer are low enough to qualify. For example,
in a year with severe winter weather or a hurricane, it is highly likely that insurance losses and
damages will exceed those expected and eliminate the payment of any bonuses to agents for that
year.
Life Insurance Commissions
Agent commissions for life insurance policies are defined as “front-end loaded”. This means the
majority of the commission to cover the agents’ cost of selling and servicing his/her client’s life
insurance policy is paid in the first year. “Renewal” commissions are typically paid annually only for
the first 10 years of a life insurance contract. During the renewal years the commission percentages
are often adjusted downward over this period.
Life insurance commissions are paid on a “target” premium basis. The target premium of a contract
is the amount of the annual payment charged to cover the pure cost of insurance on the life of an
individual. It does not include administrative policy fees or excess premiums paid into a contract.
Examples of excess premiums paid in the first year of a policy are single pay policy premiums and
additional amounts paid into universal life insurance policies at the consumer’s option.
Although there are numerous life insurance companies and their commission structures vary greatly,
following are the average commissions ranges paid for some of the more common policies. In
situations where a life insurance representative sells a policy to the client of an independent property
and casualty insurance agent, these commissions are generally shared on a mutually agreeable
percentage basis.
Term Life Insurance
70-90% of First Year Target Premium
3% of Excess Premiums
5-10% Years 2-10 of policy
Whole Life Insurance
50-85% of First Target Year Premium
3% of Excess Premiums
5-10% Years 2-10 of policy
Universal Life Insurance
80-95% of First Target Year Premium
5-10% Years 2-10 of policy
©2006 Renaissance Group